What Is A Joint Venture and How Does It Work?

How Do We Define a Joint Venture?

Which business owner does not want to shoot up the firm’s revenue? Even a person who owns a startup, with hardly any industry experience, wishes to achieve global recognition. Determination of the success rate depends upon how fast someone reaches the pinnacle and of course, the reach of the services.

Joint Ventures In India

But How Does One Accomplish that Dream?

One way is via Mergers and Acquisitions. A frequent recourse, however, is the idea of a Joint Venture.

A joint venture is an agreement between two or more commercial companies based on a shared interest. In such a scenario, the entities which are a part of the alliance have access to each other’s pool of resources. Additionally, both the partners are equal holders of profit and equal bearers of losses.

The very recent Mahindra-Ford venture is a striking case in point when we talk about joint ventures in India.

A joint venture might seem analogous to a business partnership. However, it is not.

When two entities decide to consociate, it is usually short-lived. Moreover, Joint Ventures do not involve a single person but an entire enterprise. On the other hand, a partnership is long-term and happens between two individuals.

Why Does a Business Owner Opt to Have a Joint Venture? What are the Benefits of this Mutual Agreement?

A joint venture may or may not be limited to a single project. Market Expansion and mushrooming the out-turn is usually the reason behind venturing.

Coming in association with another firm elevates the capacity and expertise of the children firms, one of the most excellent features of joint ventures.

A union like this benefits both the businesses by cutting down significant expenditures- Let’s say the cost incurred as a result of marketing and advertising schemes.

What are the Things to Hark Back to, If and When You Plan on Associating with Another Business Firm?

It is facile to align. But some people fail to realize the complexities of a venture when your image is directly linked to someone else’s bust. Therefore, one should be thorough with the company’s records before the handshake occurs.

Furthermore, one should prefer picking a business belonging to a slightly different domain than yours. The dominant motive should be inclusive growth.

How Does a Joint Venture Function?

Whenever two businesses decide to come into a strategic alliance, the companies need to give an intimation to several people about this decision. Therefore, documenting the entire planning, contribution, control duties, rights, scope, ifs, and buts is a must. The preparation of legal documents citing the responsibilities of each member of the venture is essential.

It is better to take aid from a legal advisor since he can apprise you about the rules and clauses better than any other person.

Whether you have come together to increase the range of your product offerings or with the motive of reducing a vie, a formal piece of paper is necessary. This writing serves as evidence of the agreement and states the “HOW” part of the union.

Intellectual property protection and clearing the terms is an essential component if we want a joint venture to work successfully.

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Article Author Details

Robbie Stone